All posts tagged dell

Sometimes it’s hard to let go — just ask the founders of some of the best-known names in corporate America (and Canada). Over the last 12 months, many of them have tried — with only limited success — to change the trajectories of the big companies they started.

Some of those companies have been eclipsed by competition, others simply made bad decisions. Who better to fix the course than the man who started it all, even if he no-longer owns a controlling stake? That might be the thinking, but it hasn’t exactly worked out in plenty of examples.

To name a few:

Best BuyRichard Schulze, who co-founded the electronics retailer in 1966, stepped down as chairman in mid-2012 amid a controversy over his hand-picked successor as CEO, Brian Dunn, who also resigned. Not long after, and with the company’s share price tumbling, he launched an effort to buy out the company and take it private at a valuation of around $8 billion. But as Best Buy’s fortunes slowly turned, those talks came to an end this February, and the company has since become the second-best performer for 2013 on the S&P 500, up 196%. This week, Mr. Schulze announced a plan to begin selling his 20% stake in the company, as part of a “personal long-term strategy for asset diversification and liquidity.”

Say what you will about Microsoft, but the software giant that once dominated the computer industry can’t be accused of deserting sinking ships. Instead, it seems more inclined to plant its flag proudly on their bows.

Microsoft keeps hitching its fortunes to lame horses. It shows how rickety parts of the software giant’s business are.

Barnes & Noble, Best Buy, Nokia, Yahoo and Dell all face very difficult circumstances of their own. While Microsoft’s deals with most of them make sense, its relatively unpopular products and a changing competitive environment mean they may not prove particularly fruitful.

Microsoft is still earning good money, as its operating system and software remains the default in the business world. In its most recent quarter, it made $6 billion in profit, up 19%. But in its battle for a piece of the lucrative tech markets of the future — mobile, tablets, internet services — it has teamed up with technology players with real troubles of their own.

After the jump, a brief summary of Microsoft’s difficult partnerships… Read More »

It’s a rough morning for the establishment players in the PC industry: HP stock is down 5%, Microsoft down 4.5%, Lenovo down 7.4%. The only big PC maker whose stock has stayed relatively flat is Dell, which isn’t surprising given the bidding war taking place over the company.

But while the traditional end of the PC, rise of the tablet-smartphone axis story is well known, other forces are also at play that are bad news for the industry’s big players. In a note today, Trip Chowdhry of Global Equities research points to a couple of other developments that are set to sting the PC makers. And both of them come from Amazon.

First, Amazon — which operates a massive computer network to power both its own services and its cloud computing business — is cutting out the middle men like HP and Dell when it wants to buy new servers. Instead, it’s going straight to the source: the so-called original design manufacturers (ODMs) in Taiwan.

Second, Amazon has hired 50-60 new enterprise salespeople, Chowdhry estimates, with some of them coming from Oracle. Those people are now busy selling big corporate customers on the idea of ditching their own servers and running their computing work in the Amazon cloud. Particular uses, like crunching monthly and quarterly financial reports, require heavy computer work for a couple of days per month – “such workloads are ideally suited” for sending to the Amazon cloud, Chrowdhry writes.

The conclusion? These are another couple of data points among the many that show a steady migration of value in the IT industry, from hardware to what Chowdhry calls the “data-fabric” layer. Whatever you want to call it, it’s not selling boxes with PCs in them, and it’s not what Dell or HP are known for being particularly good at.

Here’s the opening of a letter Southeastern sent to the Dell board, released in an SEC filing today:

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Dear Board of Directors:

Southeastern Asset Management, Inc. beneficially owns on behalf of its investment advisory clients approximately 8.5% of Dell’s outstanding shares (including options), making us your largest outside shareholder. We are writing to express our extreme disappointment regarding the proposed go-private transaction, which we believe grossly undervalues the Company. We also write to inform you that we will not vote in favor of the proposed transaction as currently structured. We retain and intend to avail ourselves of all options at our disposal to oppose the proposed transaction, including but not limited to a proxy fight, litigation claims and any available Delaware statutory appraisal rights.

Today’s news that Dell plans to go private means one less high-profile tech name on the Nasdaq stock market, and a new vacancy in the closely tracked Nasdaq-100 index, which follows the exchange’s most valuable companies. Becoming a part of the index means lots of new buyers for your shares, so it’s good news for the shareholders of whoever makes the cut.

So who will step up and join the index when Dell departs?

Membership in the Nasdaq-100 index is decided in an annual ranking review that takes place at the end of each calendar year. Unless “extraordinary circumstances” call for a special review, it stays the same throughout the next calendar year. Unless, as its regulations say:

If at any time during the year other than the Ranking Review, an Index Security no longer meets the Continued Eligibility Criteria, or is otherwise determined to have become ineligible for continued inclusion in the Index, it is replaced with the largest market capitalization security not currently in the Index and meeting the Initial Eligibility Criteria listed above

The Nasdaq Q-50 index lists the biggest stocks that are eligible to join the Nasdaq-100: consider it a kind of waiting list for the main event. And at the top of that index is Netflix, currently valued at about $9.7 billion after its shares more than doubled since last December. Read More »

As the WSJ’s Anupreeta Das and Ben Worthen wrote yesterday, this is the biggest deal since the onset of the financial crisis.

It could also end up being seen as signpost at the end of the PC’s decades of dominance, coming as Dell’s core products become increasingly marginal to the real action in the computing industry.

Microsoft’s role in this deal — a $2 billion loan — won’t get it board seats, the WSJ has previously reported, but it comes with an agreement that “Dell would agree to use Microsoft’s Windows software to power the vast majority of its devices”. That is particularly notable in context of any move Dell might make into mobile or tablets.

In short:

- Dell shareholders will be offered $13.65 in cash for each share, a 25% premium to the share price when the deal rumours first surfaced

- Values the company at $24.4 billion

- Michael Dell first approached the board proposing the deal in August 2012

- For the next 45 days, Dell and advisors will “actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals“

- The deal includes a $2 billion loan from Microsoft

- Deal expected to close by the end of the second quarter of Dell’s 2014 financial year